NEW YORK (
shares are up Wednesday in a scenario that plays out so frequently with the stock, it makes you marvel at the sheer mass of dumb money out there.
During a presentation at an investor conference Wednesday morning, General Electric CEO Jeff Immelt used both of those magic words that get the company's substantial base of retail investors all in a froth: buybacks and dividends.
Immelt said General Electric will "launch
program by the end of this year," then he added later, in response to a question, that General Electric will announce an increase in its dividend by year-end, assuming it gets board approval.
Immelt and General Electric CFO Keith Sherin have been saying they want to raise the
for at least four months now, but every time they do it, it gives the stock a boost.
Wednesday was no exception. General Electric shares were higher most of the day on heavy volumes following Immelt's comments. Though the shares had flattened out with about an hour and a half left in trading, they were still outperforming both
, a popular financial sector exchange traded fund, and
, a popular industrial sector ETF that has GE as its largest component.
What does it mean when a stock jumps every time a CEO repeats himself? You could say it means investors believe him, or you could say it means investors are always ready for him to change his mind, as Immelt did last year when he cut
after saying he wouldn't.
Putting all this aside, there is the question of whether dividends or buybacks make sense in the first place. Studies have shown that companies tend to buy back shares when their stock is peaking, as they are busy hoarding cash when their shares are at their cheapest.
As for dividends, if they're so great, why hasn't
paid one out since the 1960's? Doesn't GE want to invest in R&D for new biotech or water purification products?
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I'm not saying GE's stock isn't cheap. After all, when Berkshire Chairman
bought $3 billion in stock options in Oct. 2008 with a strike price of $22.25, he presumably knew what he was doing. If you believe that, and you're in for the long term, Tuesday's price of $17.30 looks pretty darned good.
But, c'mon folks, it's not because Immelt says he's raising the dividend.
Written by Dan Freed in New York
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